MFIs un­der stress, banks find­ing it dif­fi­cult to lend: RBI

The Pak Banker - - Front Page -

NEW DELHI: Mi­cro­fi­nance in­sti­tu­tions are un­der some stress and banks are find­ing it dif­fi­cult to jus­tify lend­ing to them, said Re­serve Bank of In­dia's (RBI) deputy gover­nor Su­bir Gokarn on Tues­day.

Gokarn, who termed MFIs as a very im­por­tant com­po­nent of In­dia's in­clu­sive strat­egy, said the com­mu­nity will have to op­er­ate in ways con­sis­tent with the over­all in­clu­sion agenda of the cen­tral bank.

"Mi­cro­fi­nance in­sti­tu­tions con­sti­tute a very im­por­tant com­po­nent of our in­clu­sive strat­egy. The last mile that the MFIs have been able to achieve is not achieved by the for­mal sec­tor," Gokarn said. His state­ment came barely a fort­night af­ter RBI's for­mer gover­nor Yaga Venu­gopal Reddy termed mi­cro­fi­nance in­sti­tu­tions as In­dia's sub­prime. "The last mile that the MFIs have been able to achieve is not achieved by the for­mal sec­tor," Gokarn said while com­ment­ing on the role of MFIs in the coun­try. Ear­lier, the fi­nance min­istry had told pub­lic sec­tor banks to ask MFIs to cap their lend­ing rates in the range of 20-24% as a pre­con­di­tion to ad­vances.

Fol­low­ing that SKS Mi­cro­fi­nance said that it will bring down rates to 24% across states. "At the same time they have to op­er­ate in a way that is con­sis­tent with the over­all in­clu­sion agenda. The com­mu­nity will have to achieve the bal­ance. They have to find ways of keep­ing them vi­able and ac­tive within cer­tain bound­aries of busi­ness process," Gokarn said. -PB News

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